The end of the personal tax year is creeping up on us – it’s only 3 weeks away! So, what can you do before 5 April 2014 to help cut your tax bill? We’ve rounded up our Top 5 actions to take a look at.
1 – ISAs
One of the quickest and easiest ways to save tax on your investments is to use your Individual Savings Accounts (ISA) annual allowance. All interest, income and profits on selling an ISA are tax-free, so it’s a really tax-efficient way of saving.
Adults can invest up to £11,520 in an ISA each year and don’t forget the kids – you can put up to £3,720 into a Junior ISA or Child Trust Fund for each of your children. So, a family of 4 could invest up to £30,480 and get all of the related income tax-free.
2 – Pensions
You can invest up to £50,000 in a pension in the year to 5 April 2014…..and get tax relief from the government.
If you’re a basic rate taxpayer, the government effectively puts £25 into your pension for every £100 you contribute. If you’re a 40% taxpayer, this rises to £67, and for a 45% taxpayer, it’s £82!
The annual limit drops to £40,000 from 6 April so, if you’re thinking of investing in a pension, now’s the time to do it.
3 – Capital Gains Tax
You get an annual tax-free exemption of £10,900 on any Capital Gains that you make, ie the profit on selling any of your assets. This could, for example, be the profit on selling a rental property or investments.
Therefore, it’s worth thinking about the timing of any sales – if you’re thinking of selling something soon, but haven’t used this year’s exemption, then you should sell by 5 April to get the £10,900 tax-free.
You can also think about transferring assets to your spouse to use up both exemptions.
4 – Child Benefit
If you receive Child Benefit and either you or your partner earns more than £50,000 in the tax year, you’ll have to pay some of it back. If either of you earn more than £60,000, you’ll have to pay it all back. For a family with two children, this can be worth £1,752!
If you’re above the threshold, there are actions you can take before 5 April – for example, pension contributions or charitable donations are deducted from your income when calculating the £50,000.
5 – It’s all in the timing
If you own your own company, you can choose the timing of any dividends, bonuses or salaries. Therefore, it’s worth keeping an eye on whether you’re near any of the main thresholds and deciding whether the money is best paid out this year or next.
The main thresholds of annual income for a standard adult are:
- £9,440 – limit of tax-free allowance
- £41,450 – start of 40% tax rate
- £50,000 – start of withdrawal of Child Benefit
- £60,000 – all Child Benefit is withdrawn
- £100,000 – start of withdrawal of personal tax-free allowance
- £150,000 – start of 45% tax rate
All of the above can be done before 5 April. It makes sense to ask for advice before doing any of them, so please let us know if you need any help.
If you would like to arrange a free meeting with a Liverpool accountant to discuss personal tax, either at our office or at your premises, please contact us on 0151 724 3960 or by email at [email protected].
Alternatively, you can use our website contact form.
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Added by Jon Davies